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European Markets Finished In The Red After Spanish Bank Downgrade

5/18/2012 11:58 AM ET

The European markets closed in negative territory on Friday, after Moody's lowered its ratings on a number of Spanish banks. Shares of European banks were mixed following the announcement. Mining stocks were weak due to concerns over Chinese growth, as well as shares of luxury goods companies and beverage companies.

Moody's downgraded 16 Spanish banks Friday, citing rising loan defaults, a renewed recession in Spain, restricted funding access and the reduced ability of the Spanish government to support lenders.

Moody's said, "The Spanish economy has fallen back into recession in first-quarter 2012, and Moody's does not expect conditions to improve during 2012. Moreover, the real-estate crisis that began in 2008 is ongoing, and unemployment has risen to very high levels."

Fitch had on Thursday downgraded Greece's long term credit rating to CCC from B-, citing heightened risk that the nation may not be able to sustain its membership of Economic and Monetary Union.

Meanwhile, the Bank of Spain said the country's bad loans increased further in March. About 8.37 percent of loans held by banks in March were unpaid for more than three months. That compares to 8.3 percent in February. This was the highest bad debt ratio since 1994.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.24 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.96 percent.

The DAX of Germany dropped by 0.60 percent and the CAC 40 of France closed down by 0.13 percent. The FTSE 100 of the U.K. fell by 1.39 percent and the SMI of Switzerland decreased by 1.25 percent.

In Frankfurt, Deutsche Wohnen fell by 1.35 percent. JPMorgan initiated the property investment & management firm with a "Neutral" rating.

Commerzbank closed lower by 0.50 percent, but Deutsche Bank gained 0.18 percent.

Machinery & equipment company Rational increased by 1.85 percent. Chevreux raised the stock to "Outperform" from "Underperform."

In Paris, Societe Generale increased by 2.17 percent. Credit Agricole gained 0.33 percent and BNP Paribas climbed by 2.86 percent.

In London, Royal Bank of Scotland declined by 5.51 percent. Barclays dropped by 3.24 percent and Lloyds Banking Group finished lower by 6.11 percent.

Shares of Vedanta Resources fell by 2.69 percent and Xstrata declined by 4.34 percent. Rio Tinto dropped by 2.35 percent and BHP Billiton closed down by 1.27 percent. Anglo American lost 1.49 percent.

Diageo finished lower by 2.23 percent and SAB Miller declined by 2.30 percent.

Germany's producer price inflation slowed to the lowest level in twenty-two months in April, data released by the Federal Statistical Office showed Friday. The output price inflation eased to 2.4 percent in April from 3.3 percent in March, while economists expected inflation to slow to 2.5 percent.

British households continued to remain downbeat about their property prices in May, but at a lesser degree compared to the previous month, data from a survey by Knight Frank and Markit Economics showed Friday. The house price sentiment index rose to 46.3 in May from 45.4 in April, indicating that households were less pessimistic about their home prices.

House prices in China continued its downward trend in April, with 46 out of 70 cities surveyed by the government declining from a year ago. In March, prices fell in 38 cities.

by RTT Staff Writer

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